Cow and Chicken: Burger Costs Hit a 3-Year Low Ahead of Independence Day (But Chicken Is Cheaper)

(Bloomberg) With beef this cheap for the Fourth of July, you might as well invite the whole neighborhood over for burgers.

Thanks to a boom in supply, retail-beef prices are low enough to compete with pork and poultry. Americans spent $803 million on beef, the most popular U.S. Independence Day meat, in the two weeks near the Fourth of July holiday last summer, a Nielsen report shows. The celebration is the nation’s top grilling day of the year, with 87 percent of consumers expected to barbecue, according to Weber-Stephens Products LLC.

U.S. beef production is rising for a second straight year, helping to boost meat and poultry output to the highest ever. While wholesale prices have fluctuated this year, ground beef at the grocery store remains near the cheapest since 2014. And hedge funds are signaling they expect prices will remain low. They’ve cut their wagers on a rally for cattle futures to the smallest in 11 weeks.

Bigger supplies are “a big part of beef prices,” David Anderson, a livestock economist at Texas A&M University in College Station. “And here we are at the holiday, so go grill something. I have some steaks that look really good in the freezer.”

On the Chicago Mercantile Exchange, cattle for August delivery dropped 0.5 percent to $1.1575 a pound. The most-active futures price is little changed this year.

The cattle net-long position, or the difference between bets on a price increase and wagers on a decline, dropped 5 percent to 125,185 futures and options in the week ended June 27, according to U.S. Commodity Futures and Trading Commission data released three days later. That was the lowest since April 11.

American beef production is expected to climb 4 percent this year to 26.292 billion pounds, the highest since 2010, the U.S. Department of Agriculture estimates. The gain comes as feed has stayed cheap for livestock producers, with corn futures falling for four straight years through 2016. Pork and chicken output will both reach records.

Higher output is helping to keep ground-beef prices low at the grocery store. Retail costs have stayed cheap even as wholesale costs climbed, signaling that consumers will likely enjoy lower bills for the next year and a half as production keeps expanding, said Chris Hurt, a professor of agricultural economics at Purdue University in West Lafayette, Indiana.

Wholesale beef is up 11 percent this year to $2.2473 a pound. By contrast, retail ground beef is unchanged since the end of last year at $3.559 a pound as of May, down 4.3 percent from 12 months ago, Bureau of Labor Statistics data show. Prices reached $3.547 in April, the lowest since January 2014.

At Paulina Market in Chicago, owner Bill Begale said he’s held prices more or less steady for the last year and a half even though the wholesale costs have climbed for his butcher and smokehouse.

But there are signs of pressure easing for retailers. Wholesale beef dropped 8.5 percent in June, snapping four straight months of gains, just as demand tends to reach its seasonal peak around the July Fourth holiday. Retailers could pass the savings on to customers.

“There’s a lull in activity between Fourth of July and Labor Day,” said Katelyn McCullock, a livestock economist at Washington-based American Farm Bureau Federation. “It can really impact the market.”

Demand is increasing for U.S. beef exports. In the four months through April, shipments were 20 percent higher than a year earlier, according to data from the U.S. Meat Export Federation. The increases could continue as China has restarted imports of U.S. beef, lifting a ban in place since 2003.

At the same time, the U.S. suspended all fresh beef imports from Brazil amid food-safety concerns. That could tighten up domestic supplies.

The growth in domestic and foreign demand may help to boost cattle futures later this year, according to Societe Generale SA. The bank forecasts prices to average $1.30 in the third quarter and $1.25 in the fourth, compared with Friday’s close at $1.163.

Still, holiday revelers won’t have to worry about finding beef deals this week. Another boon for consumers: other staple items are also cheaper for barbecues. Pork chops, ice cream, white bread and chips are all down from this time last year. At the average 10-person cookout, it’ll cost just $5.70 per head, down about 1 percent from last year, according to the American Farm Bureau Federation.

But chicken is cheaper!

Of course, cow and chicken prices are not included in core PCE prices as they are deemed as too volatile. But since earnings growth is stagnant, it is just as well that cow and chicken prices have fallen.

realearnung

Cow and chicken. Fortunately, neither one is rising in price (for the moment). But I will be eating fish on Independence Day.

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